Daily Brief: Tadawul Is Listing On The Stock Market, So Let’s Just Hope The Future Doesn’t Hold An Oil Slump

Daily Brief: Tadawul Is Listing On The Stock Market, So Let’s Just Hope The Future Doesn’t Hold An Oil Slump

over 2 years ago3 mins

Tadawul – Saudi Arabia’s stock exchange operator – is planning to list on the stock market next month, in a move that’s been on the cards for a long time…

What does this mean?

Tadawul was reportedly first thinking about listing its shares on… well, itself back in 2016, but the company paused the plan to focus on more pressing matters: encouraging foreign investors to trade on its platform, and hosting the biggest-ever initial public offering (IPO) for oil giant Saudi Aramco.

The company might’ve been right to wait. For one thing, the number of trades on its exchange is now at record highs, boosting both its bottom line and investor optimism. And for another, the company should fetch a good price for its shares given how high valuations are right now. Tadawul, then, has said it’ll sell a 30% stake in its business on the stock market next month – a move that could see it raise up to $1 billion.

Why should I care?

The bigger picture: Oil country problems.

There is one big risk to Tadawul, mind you. See, OPEC+ – a group of the world’s biggest oil-producing countries – looks like it’ll resist calls to boost oil production in December, which might encourage Japan, China, and the US to release some of their own stockpiles. That extra supply would drive down prices, which would dent Saudi Arabia’s heavily oil-dependent stock market. And if investors start steering clear of the country’s stocks, Tadawul’s profits – and its eventual IPO valuation – could take a hit.

OPEC

Zooming out: IPOs might run out of steam.

It’s been a record year for IPOs, with companies raising over $600 billion already this year. A lot of that’s to do with government and central bank support that’s helped keep investors flush with cash. But that support is starting to dwindle, and some analysts are warning that the shift could cause stock valuations to drop off – and take the IPO boom along with them.

IPOs

Keep reading for our next story...

Dividend Payouts Are On Course To Beat Pre-Pandemic Levels

Dividends image

The year’s dividend payouts are on course to pass pre-pandemic levels by the end of 2021, so you can relax: the last couple of years was all just a bad dream.

What does this mean?

Companies across the board cut their dividend payouts last year, nervous that they wouldn’t have enough cash on hand to outlast the pandemic. This year, though, they’ve been feeling more confident about sharing their profits with investors. Case in point: 90% of all companies either raised dividends or kept them steady last quarter, paying out $404 billion in total – up 22% from the same time last year. And that – along with strong analyst predictions for this quarter – suggests global dividend payouts this year are on track for a new annual record.

Dividends

Why should I care?

Zooming in: Winners become losers.

The uptick in dividends last quarter was driven primarily by both the mining sector – which benefited from strong commodity prices – and the banking sector, which was released from tight pandemic-induced restrictions. But the two sectors might have very different outlooks going forward. Miners’ profits – and, by extension, their payouts – are at risk from falling commodity prices, which are looking increasingly likely as supply bottlenecks start to clear. Banks’ loans businesses, meanwhile, look set to profit from higher interest rates, not least because the head of the Federal Reserve – who is planning to hike rates next year – was re-appointed on Monday.

The bigger picture: Back to old faithful.

The absence of dividend income has been felt keenly by everyone from pension funds to charities – those that rely on a steady influx of cash to fund their commitments. They’ve instead been having to rely on bonds, whose rock-bottom yields have made it seriously difficult to generate a stable income. This bounceback, then, will come as welcome news going forward.

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